Value Relevance of Accounting Information in the Emerging Chinese Stock Market (Re Visited)

Value Relevance of Accounting Information in the Emerging Chinese Stock Market (Re Visited)

James A. Rossi
Copyright: © 2017 |Pages: 11
DOI: 10.4018/978-1-5225-1900-3.ch005
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Abstract

Value relevance of accounting information is a very important issue – not just from the perspective of Foreign Direct Investment and the reliability and relevance of financial and accounting information for investors – whether institutional of individual, but also in matters of Corporate Social Responsibility and financial reporting. This being of crucial importance given the need to enhance the quality and presentation of financial information, the need for comparability and consistency as a means of enhancing the relevance and reliability of financial information. This issue of reconciliation of discrepancies hence constitutes a matter in need of urgent redress in capital markets.
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Introduction

Value relevance of accounting information is a very important issue – not just from the perspective of Foreign Direct Investment and the reliability and relevance of financial and accounting information for investors – whether institutional of individual, but also in matters of Corporate Social Responsibility and financial reporting. This being of crucial importance given the need to enhance the quality and presentation of financial information, the need for comparability and consistency as a means of enhancing the relevance and reliability of financial information. This issue of reconciliation of discrepancies hence constitutes a matter in need of urgent redress in capital markets.

As highlighted in Enron (IFRS:2014):

Enron’s accounting was misleading to users and that specifically, the accounting risks for Enron were too high to be considered acceptable or presented fairly. To make them acceptable, adjustments would have been necessary to the reported estimates. Accounting risks should have been reduced to an acceptable level (as suggested by ISA 540) so that the reported numbers were more reliable.

This chapter seeks to contribute to the gap in the literature on the value relevance of accounting information in China. In so doing it investigates the relevance and reliability of results derived in this study, their applicability to current market developments – as well as recent fluctuations and volatility in the financial markets.

Conclusions derived from previous study undertaken by Chen et al, (2001). Is Accounting Information Value-Relevant in the Emerging Chinese Stock Market? Journal of International Accounting, Auditing & Taxation 10 (2001) 1–22 are as follows:

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